BUSINESS MEETS
OPEN-SOURCE
GIVING AWAY YOUR PRODUCT FOR FUN AND PROFIT
Open-source

Business
OPEN-SOURCE AND BUSINESS
• Why do this?
• What are other companies doing?
• SilverStripe’s story
• Lessons learned
WHY?
SILVERSTRIPE
HISTORY
2000

Founded

2002

SilverStripe 1

2006

SilverStripe 2

2007

Open source release

2007-2013

All ...
2007-2013

All The Good Things
WHY?
WHY OPEN-SOURCE?

YOUR MARKET
EXPECTS IT
WHY OPEN-SOURCE?

MARKET
AWARENESS
WHY OPEN-SOURCE?

PASSIONATE
USERS
WHY OPEN-SOURCE?

PASSIONATE
STAFF
WHY OPEN-SOURCE?

CONTRIBUTORS
PaaS

Platform-as-a-service

SaaS

Software-as-a-service
REVENUE FROM WEB DEVELOPMENT WORK

GROWTH =
MORE PEOPLE
REVENUE FROM WEB DEVELOPMENT WORK

COMMUNITY
GROWTH

≠

BUSINESS
GROWTH
REVENUE FROM WEB DEVELOPMENT WORK

COMPETING
WITH OUR
COMMUNITY
LESSONS
DIY
VS

INFRASTRUCTURE
BUSINESS
IS HARD
STAY
COMPETITIVE
WORK WITH
YOUR
COMMUNITY
PICK THE
RIGHT KIND
OF PRODUCT
WRAPPING
UP…
DIY
VS

INFRASTRUCTURE
PaaS FTW!
BUSINESS
IS HARD
WORK WITH
YOUR
COMMUNITY
FOCUS ON

• Infrastructure & platform
products
• Business customers
• Not-so-small customers
THANK YOU!

SAM MINNÉE
SILVERSTRIPE
@SMINNEE
THANKS, FLICKR COMMUNITY
The following Creative Commons images were sourced from Flickr. Thank you to their creators!

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Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
Business meets Open-source: Giving away your product for fun and profit
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Business meets Open-source: Giving away your product for fun and profit

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It's unlikely that anyone here will question the value of open-source software, but how do you build a business around it? Drawing on the successes and failures of SilverStripe, and a few stories from other companies, Sam will discuss different ways in which you can build a successful business that has open-source software as its core IP. There are no hard & fast rules – open-source business models are still ripe for innovation – but Sam will leave you with a few principles and a few ideas to get your thinking started.

(I gave this talk at OSDC 2013)

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  • Good morning! Who loves open-source! Yeah, silly question at a conference like this. We all think open-source software is the bees knees. There are so many ways in which the open-source model is a superior way of getting software built.
  • In a successful open-source project, more eyeballs are being cast over the code, meaning that bugs can be identified and ironed out more readily.
  • Users of the software can do anything they want with it, giving more flexibility, if you have the development chops to make changes.
  • And open-source projects can be used as the starting point of different projects. Open-source software projects successfully manage the contributions of a wide variety of developers of varying levels of skill, they provide a natural starting point for talented but inexperienced developers to get their feet wet in software development.
  • It provides better support for distributed teams, and it’s probably furthered the cause of world peace at least once. In encouraging sharing of ideas and openness, it brings the spirit of scientific enquiry to software development. It’s just... awesome.
  • But a guy’s gotta get paid.
  • So, today I want to explore the unusual territory where open-source meets business. SilverStripe, the company that I helped found, and that I am now CEO of, has, as its flagship product, a piece of open-source software: the web platform, SilverStripe CMS. And I am completely convinced that releasing SilverStripe CMS open-source was the right decision. But it hasn’t always been easy, and it does present challenges. So, the relationship between open-source and business can be tense. But, it can also be made to work.
  • What am I going to talk about? First up, I’m going to talk about some of the reasons why people might want to this. Then I’ll look at what some companies have done, finishing up with my own company, SilverStripe, where I can speak a little more knowledgeably about what has worked and what has had to change over the years. With all that in mind, I’ll look at what lessons can be learned. I’ll give you some tips on the kinds of software that I think are well-suited to open-source businesses. I’ll talk about the different kinds of business models - the revenue models, basically - that you might want to consider. And finally, I’ll talk some of the rocks that you might come across along the way, so you don’t need to trip over them. If you’re working on an open-source project that you’d like to build a business around, or if you’re thinking of releasing your company’s crown jewels under an open-source license, I’ll leave you with a few ideas to get your thinking started.
  • Why would people want to do this? Do what? Well, there are a few sides to that question. Why would a company open-source its software? And why would key members of an open-source project want to start a business around it?
  • So, why would a company open-source its software? Give it away for free? A few months back I was talking to a financial consultant about how SilverStripe operated, explaining what SilverStripe was and what open-source meant, and he did a double-take: “So you’re telling me that you give your main piece of intellectual property away for free? Well, I think you may want to revisit that strategy...” It’s confusing. But there are some solid reasons why, for a particular market, an open-source license might be good.
  • Perhaps the best way to answer this question is to look at why we open-sourced. A bit of history. SilverStripe was founded in 2000, under the name “Totally Digital”, and in about 2002 we put together the first version of a CMS called SilverStripe. It only ran on IE5.5 or higher - the clear winner of the browser wars, right? - and it was closed source. We were selling it to our clients, and that was okay, although when we had a $1,000 license fee and a $10,000 website build fee, it was the license that they complained about. But we didn’t really have scale. So we tried selling it through web developers. We polished up the tools that you use to create sites with it, peddled it to some web developers, and they said “looks great, we might use it if we get a bigger project, but for our next project we’re going to use this open-source one because the clients got a tight budget” I don’t even know what platform it was in those days - Joomla was around, I think? - but by the time a bigger project came along they had had so much experience with the open-source tool, that they just kept using that.
  • So, one weekend, we all hunkered down in a bach in Martinborough to talk about The Future. And one of the conclusions that we came to was that, most of our money was coming from things other than license fees, and that if we sacrificed the license fee component to grow our user-base, the business might benefit overall. And I’m very sure that it was the right decision: we went on to have years of sustained growth, we got international exposure, and we saw a bunch of other kiwi companies peddling proprietary CMSes quietly fade away.
  • To recap, what were the reasons?
  • To recap, what were the reasons? First up, your market might expect it. If you enter a market, you generally have to meet them on their terms. You can’t make a successful social networking platform unless people can sign up for free. App.net was a good example of that. In the CMS space, open-source was kind of an expectation, not from all developers (Microsoft has its supporters), but from a good number of them. The web is built on open-source software.
  • Secondly, open-source projects can often gain international market awareness more rapidly than a proprietary project. People - developers - fall in love with open-source projects more easily, they see them not just as a product produced by a company, but as a cause, and so they want to tell the world about it. We benefited particularly from the Google Summer of Code programme, and when Dewey Digital were looking for a CMS to build the 2008 US Democratic National Convention website, SilverStripe was a lot more attractive as an open-source project than an NZ-developed proprietary system would have been.
  • Related to that is another advantage, which is that you create more a passionate, engaged community of users. People see these systems as their power tools, they’ll blog about them, forgive minor sins, and generally be a much better group of users to work with.
  • It’s also great for staff satisfaction - a lot of people out there like the idea of working on an open-source product more than a proprietary one.
  • And finally, some of those passionate users will start helping you develop the software. It takes a lot of patience and attention to get them to the point where they’re effective in doing so, but it can be a real benefit.
  • So - even from the nakedly self-interested standpoint that the Platonic Ideal of a business leader supposedly has, open-sourcing a major product can make sense. And, more than that, a lot of us like open-source, and all other things being equal we’d rather work on an open-source project, we just want to make sure we’re not killing our business in doing so.
  • On the other side of table, why might people involved in an open-source project want to build a business around it? In a word, so you can make the project your day job. It’s not without its caveats; sometimes, you will run into conflicts between what’s best for that business, and what’s best for the project. With those kind of challenges, it’s important to maintain integrity.
  • What does this all mean in practise? Well, let’s look at some examples. I’d like to look at a few other companies, before talking in a bit more detail about what we’ve done at SilverStripe: RedHat, MySQL AB, Acquia, Heroku, and 37 Signals. I should probably start by saying that, in all of these examples, I’ve just combined what information I could find on the internet with my own thoughts. I have no special knowledge about any of their business strategies or the reasoning behind their decisions.
  • So, first up, Red Hat. Red Hat have been around a while, they were founded in 1993 by Marc Ewing, and quickly joined by Bob Young. Now, they didn’t decide to open-source Linux; instead, they have taken an existing open-source project and built a business around it. Marc’s first idea wasn’t even to release a Linux distro, he kind of stumbled into it getting a dev environment set up, but that kind of accidental meandering is more common than we’d like to admit, I think. Today I suppose it’s called “Pivoting”.The technology world has changed a lot since 1993 and Red Hat’s business model has changed with it. Initially, what Red Hat charged for was disks: you could purchase a set of disks with Red Hat on it, and that was the business model. Over time, internet connections became faster and more widespread and Red Hat’s ambitions grew, and this business model was less compelling. Support contracts, training, and certification were added to their business. This is a pretty business model for an open source company have even these days, and if nothing else it’s a good first step.In 2002, Red Hat released what would become Red Hat Enterprise Linux, usually going by the unpronounceable moniker “RHEL”. With RHEL, Red Hat introduced a more revenue model that was a bit closer to the software license purchase of a proprietary software company. Although most of the source code was available, either in their Fedora project, or in follow-along projects like CentOS, you had to pay for the binary distribution, and it came bundled with various support services. It seems like this is working pretty well for them. Because it’s being released as a commercial product, maybe it’s not really in Red Hat’s interest to make RHEL available as a free download. Instead, Red Hat have a distrocalled Fedora, which is the free cousin of RHEL. RHEL has a more stately release cycle with more rigorous QA, which their customers seem to appreciate.Those customers tend to be larger organisations - corporates, enterprise, government, and the like. Larger organisations are generally more willing to pay decent money for the certainty that things are being looked after, even if they could - if they tried - take a more DIY approach and get many of the same features for free. This is important, because regardless of the specific business model, “I’ll do it myself for free” is a choice that most open source users are able to make.
  • Next up: MySQL AB. MySQL is a little like SilverStripe in that the open-source project was born within the company. The company was, of course, bought by Sun, who in turn was bought by Oracle, but until 2008 was an independent open-source company often looked to as a model of success - and a $1 billion buy-out is nothing to sneeze at. So where did their money come from?Like Red Hat, they offered training, certification, support, and consultation packages. Like Red Hat, they had a commercial product derived from their open-source one. But they did something a bit different called “dual licensing”. Because they owned the copyright on the GPL-licensed code, they were free to release it under other licenses if they wished. And they did with their MySQL Enterprise Edition. As well as providing a different license, it added features around scalability, monitoring, and analysis, and came bundled with a support package.
  • So we can see some common patterns there. Is that the end of the story? Well, I’d like to fast-forward to a much newer company, and that’s Acquia. Acquia was founded in 2007 by Dries Buytaert and and Jay Batson, to deliver products and services around the Drupal CMS. Dries was the founder of the Drupal open-source project, so this is a good example of an existing open-source project looking to commercialise after the project has gained popularity. Certainly, many open-source businesses operate on the premise that, although a small percentage of the open-source community might become paying customers, for a large community that can still be a big enough number to become a viable business. It’s not all that different from other freemium models out there. Like Red Hat and MySQL AB, Acquia sell training, consultation, and support services.
  • However, they have something else: Platform as a Service and Software as a Service offerings. More recently, Red Hat have been doing something similar with OpenShift.The “-as-a-service” business model a recent development and it is certainly not limited to open-source: most software-as-a-service systems are build as proprietary pieces of software, such as Basecamp by 37 Signals. Platform as a service came after software as a service. Instead of providing a complete application as a web service, you provided development tools. Acquia weren’t the first ones to do this.
  • For me, the first time I saw PaaS, as it’s called, was Heroku. Heroku provided a Ruby platform-as-a-service, and was particularly suited to running Ruby on Rails projects. They’ve since added many more languages, and they were bought out by Salesforce in 2010.Heroku’s initial popularity was intimately tied to that of Ruby on Rails, although unlike MySQL AB, Acquia, and SilverStripe, it wasn’t a commercialisation of an open source project started by the founders of that project. They had an idea, saw Ruby & Rails as a good vehicle for that, and builttheir business. Red Hat is not that dissimilar. However, both of these companies have found that as they grow, it makes sense to have more of their supporting projects’ contributors on their payroll. For example, “Matz”, the Chief Designer of Ruby, works at Heroku. So we’re not really talking about an either/or situation; there is more of a continuum and a complex symbiosis between open source projects and the businesses built around them.
  • While we’re on the subject of Ruby on Rails and the “-as-a-service” software delivery approach, it would be remiss of me not to mention 37 Signals. Ruby on Rails came into existence as a supporting base layer of software developed during the development of Basecamp. Most of the original contributors worked at 37 Signals, and their staff keep on developing Ruby on Rails.However, the production & release of Ruby on Rails is not publicly presented as a goal of 37 Signals. It’s another good example of the symbiotic relationship that develops.
  • OK, enough pontificating about other people’s companies. What about SilverStripe? I spoke earlier about the reasons why we decided to open-source our product, and that it’s a good move for us. What happened after that? Well, for the next few years we focused on the implementation business that we ran on top of SilverStripe. We had 3 years of strong growth, and much of that growth could be directly attributed to the increased market recognition that we got after our product was picked up by some major players. After working on the 2008 DNCC website, we worked with Air New Zealand, then with the NZ Lotteries Commission. The clients got bigger, the projects got bigger, the company grew.
  • But, at the end of the day, we couldn’t shake the sense that we were a web development shop who had a hobby of producing SilverStripe on the side. We wanted more. We identified the following issues with our approach:
  • First up, the demands on our time from the service business always starved investment in our product. To grow our business, we had to grow our staff, and that left us with a lot of mouths to feed.
  • Secondly, there wasn’t a sufficiently direct connection between the growth of our open-source community, and the growth of a market for our products. I’m not trying to be greedy here, but the fact is I wanted to see the kind of connection there that would justify heavier investment in the community’s growth.
  • Finally, it put us into competition with people who otherwise could be our biggest advocates.
  • The act of building systems on top of SilverStripe is still critically important to us, because it is the way in which we eat our own dogfood; it is the way that we keep producing a toolkit that is useful to developers. I don’t think that will ever go away. But we wanted something more.In retrospect, maybe this is obvious. The other companies we’ve looked at focused on lower-level services. And we had certainly had discussions about whether we should move away from website building and focus more on other services. But, we were good at building websites, we enjoyed it, and it was the most successful part of our business. And when we focused on that, and our business grew. It’s hard to turn away from that.
  • This year, we’ve been working with the New Zealand government on the Common Web Platform, which is – you guessed it – a platform-as-a-service style offering. It’s targeted at government departments, and aims to provide a complete package of software and services to support both the government departments commissioning websites, and the developers that actually build them. It’s early days, but it’s going well so far and represents a shift away from merely building things to providing the glue holding the SilverStripe ecosystem together.
  • So, what are some lessons to take away from all this?
  • At the heart of commercialising open-source is recognising that while open-source is a great way of getting software developed, on its own, open-source code doesn’t meet the expectations that many companies have of high-quality IT infrastructure. Open-source is kind of DIY. If you’re looking for a DIY product – that’s great. By comparison, when looking for web servers, operating systems, databases and the like, I quite like the DIY approach. I want to sit down, learn how it all works, put it together, and be in control of the whole stack.But this isn’t everyone’s cup of tea. Many organisations out there want to know that someone capable is looking after the system –that it is reliable, secure, and high-performance. Most of the products & services that open-source companies provide come down to bridging this gap.
  • So, look at your project, and think about what would actually help people go from a crappy deployment to a good one. Maybe it’s a support package. Maybe it’s an additional tool that can be used in conjunction with some kind of human support package. Maybe it’s a platform-as-a-service. The details will depend on what your software does, how people use it, and where people commonly get stuck.
  • Although there are many different ways to create a successful business, I would caution against targeting a market that is likely to always go for the cheapest option. The problem is that if your company is based on an open-source project, the cheapest option is going to be free: download the code and do it themselves. Not everyone operates in this way, and if you pick a market where people are more willing to pay for a higher level of service & reliability, you’re more likely to succeed. You don’t need to make it harder for yourself than it already is.
  • The second thing to take away is that starting a business is hard. It will consume most of your attention, and it will pull your focus away from the open-source project that might have been the reason that you started the business in the first place! It’s a balance that you can manage, but the tension will be there. Don’t imagine that you’ll get to spend all day hacking on your open-source project, because your customers will always want your attention.
  • Don’t underestimate how hard it is to get people to actually part with money for something. Salespeople often get a bad rap from developers, but there’s a reason that most companies have some kind of sales team. You can’t just put up a website and a price list and expect the money to start rolling in. You’ll need to bend over backwards for those first customers, and that will take time & effort. But it’s the only way that you’re actually going to succeed. Someone’s going to have to do it, and if it’s not you, then it needs to be some with as a lot of knowledge of and passion for the product you’re selling. If you’re a developer, the best rule of thumb is to assume that writing the code is the easy part.
  • If your project is popular enough to get a competitive market for support services built around it, there’s another thing to bear in mind: other companies who aren’t distracted by working on the open-source project might be able to undercut you. You might be able to stay ahead of the pack for a while on the basis of brand, but unless there is something more fundamental that sets you apart, this advantage won’t be sustainable. Fortunately, there’s a way out of this: if you can structure your support services such that the people providing the service get better the more they are involved with the open-source project, you can then use the on-going involvement in the project as a competitive advantage. This does, of course, make it important that you don’t have too much separation between product development and support, but that all of your support team keep contributing to the project.
  • But this isn’t supposed to be about mitigating disadvantages; open-source business have advantages too! Your biggest asset when competing with a proprietary competitor is your community. It is a source of marketing. It is a source of staff. It is a source of contributions and much richer feedback on where your product should go. You should focus on growing and supporting your community; your business’s relationship with it will a key strategic asset, as important to your business as your own staff.
  • Finally, it’s worth looking at the kind of products these companies sell. Open-source projects thrive where the users of the product can also contribute to its improvement. We see operating systems, databases, web platforms, content management systems, and the like. These are products that businesses buy and technical people are involved with. Consumer-focus open-source projects can succeed – look at Firefox and Chrome – but also look at how they’re funded. They aren’t businesses in their own right; they are sponsored by larger organisations who see an advantage in having a competitive market for web browsers. Building a standalone business around a product like this would be very difficult.
  • To close, I want to leave you with the message that building an open-source business isn’t a walk in the park, but it can be done, and if done well, can make both the business and the open-source project stronger.So, remember:
  • Bridge the gap between “DIY software” and “Robust IT infrastructure”
  • Now is a great time for Platform-as-a-service!
  • Be prepared to put all your energy into the business.
  • Maintain a great your relationship with your community.
  • And Focus on: - Infrastructure / platform products - Business customers - Not-so-small customers
  • Business meets Open-source: Giving away your product for fun and profit

    1. 1. BUSINESS MEETS OPEN-SOURCE GIVING AWAY YOUR PRODUCT FOR FUN AND PROFIT
    2. 2. Open-source Business
    3. 3. OPEN-SOURCE AND BUSINESS • Why do this? • What are other companies doing? • SilverStripe’s story • Lessons learned
    4. 4. WHY?
    5. 5. SILVERSTRIPE HISTORY 2000 Founded 2002 SilverStripe 1 2006 SilverStripe 2 2007 Open source release 2007-2013 All The Good Things
    6. 6. 2007-2013 All The Good Things
    7. 7. WHY?
    8. 8. WHY OPEN-SOURCE? YOUR MARKET EXPECTS IT
    9. 9. WHY OPEN-SOURCE? MARKET AWARENESS
    10. 10. WHY OPEN-SOURCE? PASSIONATE USERS
    11. 11. WHY OPEN-SOURCE? PASSIONATE STAFF
    12. 12. WHY OPEN-SOURCE? CONTRIBUTORS
    13. 13. PaaS Platform-as-a-service SaaS Software-as-a-service
    14. 14. REVENUE FROM WEB DEVELOPMENT WORK GROWTH = MORE PEOPLE
    15. 15. REVENUE FROM WEB DEVELOPMENT WORK COMMUNITY GROWTH ≠ BUSINESS GROWTH
    16. 16. REVENUE FROM WEB DEVELOPMENT WORK COMPETING WITH OUR COMMUNITY
    17. 17. LESSONS
    18. 18. DIY VS INFRASTRUCTURE
    19. 19. BUSINESS IS HARD
    20. 20. STAY COMPETITIVE
    21. 21. WORK WITH YOUR COMMUNITY
    22. 22. PICK THE RIGHT KIND OF PRODUCT
    23. 23. WRAPPING UP…
    24. 24. DIY VS INFRASTRUCTURE
    25. 25. PaaS FTW!
    26. 26. BUSINESS IS HARD
    27. 27. WORK WITH YOUR COMMUNITY
    28. 28. FOCUS ON • Infrastructure & platform products • Business customers • Not-so-small customers
    29. 29. THANK YOU! SAM MINNÉE SILVERSTRIPE @SMINNEE
    30. 30. THANKS, FLICKR COMMUNITY The following Creative Commons images were sourced from Flickr. Thank you to their creators! http://www.flickr.com/photos/walkadog/3573598435 http://www.flickr.com/photos/moonierocks/2561782847 http://www.flickr.com/photos/bruin/1352379843 http://www.flickr.com/photos/gabby_canonizado/10314934063/ http://www.flickr.com/photos/cgpgrey/4892197820 http://www.flickr.com/photos/cooperweb/8363161216 http://www.flickr.com/photos/epsos/8108903951 http://www.flickr.com/photos/calliope/2207307656 http://www.flickr.com/photos/fabien_lemetayer/9247211918/ http://www.flickr.com/photos/booleansplit/2447000009 http://www.flickr.com/photos/torontohistory/4624942638 http://www.flickr.com/photos/monjurulhoque/6401220837/ http://www.flickr.com/photos/ter-burg/8824555500 http://www.flickr.com/photos/oldrebel/3785837819/ http://www.flickr.com/photos/56227271@N03/5204475317/ http://www.flickr.com/photos/toddle_email_newsletters/7002322316/ http://www.flickr.com/photos/1234abcd/6115339668

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